News & Insights

“Esprit and Karstadt are facing tough challenges”

Tuesday, 16 December 2014

Brand expert Moritz Rehmann assesses attractive companies

“Esprit and Karstadt are facing tough challenges”

Christmas is the season of shopping: Every German will spend an average of 280 EUR on presents this year. Especially popular: books, cosmetics, and consumer electronics. Brand expert, Moritz Rehmann, GAMAX Funds Junior portfolio manager, comments on the most significant consumer trends which are also of interest to investors.

The Germans are in a buying mood. This is what studies from the German Retail Association (Handelsverband Deutschland, HDE), the Association for Consumer Research (Gesellschaft für Konsumforschung, GfK) and from the consulting firm Deloitte have to say. All three predict a growth in seasonal turnover this year. According to Deloitte, every German will spend an average of 279 EUR. HDE expects as much as 447 EUR and is satisfied with how things are doing up to the third Sunday of Advent. Books and cosmetics, among other items, are proving to be particular popular gift items. More than a quarter (26 per cent) of Germans also want to give someone a tablet or smartphone or purchase one around this time, according to a representative study carried out on behalf of the digital association, Bitkom.

Handelsblatt Online, working in cooperation with polling firm YouGov, has worked out which brands are currently held in particularly high esteem by German consumers. The results of this brand ranking, which names the Germans’ most-popular brands across twelve categories, makes it possible to draw some conclusions regarding the success of the companies behind the brand, and therefore the attractiveness of their shares. Moritz Rehmann, brand expert and portfolio manager of GAMAX Funds Junior, explains. “Brand rankings are an essential indicator of the medium-term prospects of a company in the consumer sector. In addition to indicators surrounding the current status quo of a company, we also closely observe shifts in the rankings, in order to draw inferences regarding the dynamics in a particular segment.”

Positions held in the fund: Nike and Adidas claim top spots in the rankings

There was little difference to be found between the companies that ranked top this year compared to 2013, however. The brand of the year is once again Nivea. Adidas, Samsung and Lufthansa also claim top positions in their respective categories. Holding the top spot is still a comparatively new phenomenon for Adidas. The sporting goods and fashion manufacturer overtook Levi’s in 2013. Rehmann therefore did not change the position of the world’s second-largest sporting goods manufacturer in the GAMAX Funds Junior. Shares in the Bavarian giant fell significantly in the middle of the year, despite their success as the sponsor of the football world cup in Brazil. The primary reason for this drop was the modest development of business in Russia, on which the CEO, Herbert Hainer, was particularly focused. The golfing segment saw a much stronger slowdown than expected, which also contributed to a correction of the share price. Jack Wolfskin takes second place before Nike in the category of fashion brands, while Puma is back in the top 5. In the consumer electronics category, Sony secures its second place behind Samsung and before Canon.

When the categories of brand ranking are compared, it is striking that in some segments discount products come up top, but in other areas the Germans prefer premium brands. For Rehmann, this is a clear indicator of which brand strategies work and which do not: “This result precisely reflects the dynamics of the German market and, by extension, the German consumer. On the one hand, budget price concepts are very successful, as is shown by the supermarket own-brands or clothing chains such as Primark and H&M or Inditex,” says Rehmann. “On the other hand, there is a strong awareness of status symbols in the high-end price segment. The companies that are not clearly positioned here, such as Esprit, or chain stores such as Karstadt, are finding it hard to succeed.”

Rehmann: “Occasional advertising is beneficial, but a problem if maintained over the long-term.”

It is not just clear positioning in the premium segment, but also massive marketing activities that have guaranteed the beer brand Krombacher its secure place in the top spot among beers. Rehmann views such advertising with mixed feelings: “Occasional advertising makes sense, but if I always need it, then the management should start wondering whether the product is sufficiently differentiated and really appeals to customers.”

Differentiation may be more difficult in the beer segment than the other sectors Rehmann generally follows, such as fashion, technology and telecommunications, where strong brands appeal especially to young people around the globe. This is also possible for the German’s national drink, however, this Berlin-born expert explains: “That Krombacher took top position clearly shows the panel asked were not from Bavaria. Otherwise, there is no doubt that the result would have been different. The beer market in particular is currently in a state of dynamic reinvention, following decades of market consolidation. Now we are seeing an increasing number of new mini-breweries, which offer beers to suit every taste.”

Looking toward what candidates might be high-ranking in the future, Rehmann is keeping an eye on the climbers on an international level, such as Tesla in the automotive sector, or Armour in sporting goods, or Netease in online gaming. “These are thematically interesting for GAMAX Funds Junior and could emerge as surprise victors in their respective categories in the rankings to come.”

About GAMAX Management AG

GAMAX Management AG, a fund management boutique based in Luxembourg, was founded in 1992 and acquired by the Mediolanum Banking Group, an Italian financial services group, in 2001. GAMAX currently runs three funds with a total value of 405 million Euro (as of October 31 2014). The boutique offers two actively-managed equity funds with specific investments in strong brands and in the Asia-Pacific region through its funds ‘GAMAX Junior’ and ‘GAMAX Maxi Fonds Asien International’. Fund manager DJE Kapital AG targets long-term outperformance of benchmark indices for both GAMAX funds.